alt Hacker NewsIt seems unlikely you'd be able to rent somewhere for less than the cost of
* maintenence
* taxes
* return on capital
Because otherwise your landlord is subsidising you, and why would they do that?
Replies
maerF0x0 • last Tuesday at 4:37 PM
> Because otherwise your landlord is subsidising you, and why would they do that?
Because they may have capitalized decades ago and the market only bears a certain price. They're not subsidizing you because their cashflow needs are actually lower than new entrants.
Rental prices are connected to costs, but not tightly.
If I'm a landlord and my costs are $X, but I can find renters for $2X, I'm probably going to charge closer to $2X.
If my costs are $X, but I can only charge $0.9X, I'll most likely rent it for that, because losing $0.1X is better than losing $X; unless I own a lot of units and it makes more sense to push the 'average rent' up, even if it means more vacancies. If the market conditions are like that for a while, I'll probably try to sell, but I'll take the loss for a while.
Additionally, if local market conditions include something like California Prop 13, a landlord that has been holding property since before I was born most likely has a much lower property tax bill than if I purchase a similar property. In that case, renting could supply them with a nice return and me with a nice discount.